60% Price Hike for Netflix

At a time when consumers are tightening their discretionary spending in the face of a tough economy, Netflix announced that they will be raising prices by 60% from $10/month to $16/month for streaming customers who also rent one DVD at a time. With Netflix earnings soaring from rapid subscriber growth and declining postage expenses, Netflix subscribers have reacted angrily – 27000+ Facebook comments expressed their dismay. It is somewhat ironic that the company that destroyed the brick and mortar DVD rental business might be sending its customers back to brick and mortar companies like Redbox.

At present time, most of the library on Netflix is only available on DVD and the few streams that are available are often only available at lower resolutions and lower bitrates (0.5 Mbps from my measurements). Netflix has been busy complaining about ISP peering capacity but the bottleneck seems to be mainly at Netflix’s end with a shortage of streaming titles, especially those in HD. Many customers want the 2-day DVD delivery available any time but they end up being too lazy to bother mailing DVDs (I’m guilty of this). This price hike seems to be reminding a lot of Netflix customers that they are paying for a DVD rental service that they hardly ever use.

Every Netflix subscriber I know is fuming. Thousands have already threatened to cancel, drop to a lower tier service, or put the Netflix service on probation to see if the online streaming library gets beefed up. Gigaom compiled a sample of comments across the web. While this is the kind of response one would expect when prices go up 60% overnight, if these reactions are representative of Netflix customers, the company has a public relations disaster on its hands.

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George Ou

Virginia

We have the streaming deal, and like others, I struggled to find anything I wanted to watch. However, my husband and kids used the subscription a lot. We have Google TV, and my husband watched a lot of Netflix movies on it with our streaming subscription. My kids watched endless movies on our iPads on long trips (they aren’t very picky). I thought it was kind of a steal at the lower price, so I find myself unsurprised. That said, if they don’t get more offerings, I agree – it might not be worth it.

Virginia

Forbes is running this piece (“stop whining!”) saying raising prices was the only way to improve selection.

That’s a good point and people who use Netflix a lot are getting their money’s worth. The problem is that a lot of people (like me) are paying for the service and rarely using it because the price was right. Bump that price up 60% and it’s a really lousy deal for me and it reminds me that I’m getting a lousy deal now considering my usage.

George Ou

The Forbes blogger says he’s willing to pay more money for the streams if the video streaming library stopped sucking. But Netflix hasn’t really promised a substantial improvement and they are effectively getting more money by kicking out the DVD subscribers since USPS postage costs them $700 million a year and bandwidth is less than 1/20th the delivery cost.

If Netflix had made it clear that they intend to use the savings to substantially beef up the video streaming library, there would be less objection. But generally speaking, people want to see services improve before or at least during the price increase.

oldtribe

Now that AT&T has capped DSL customers at 150Gb per month, following the cable companies, to neuter Netflix to 8 to 10 HD movies a month before you have to pay the same as having the lowest tier of AT&T “Uverse” (assuming you live in San Diego, but it’s coming, they swear…) the Netflix price hike will pretty much cook their goose with a lot of folks. I can’t believe that half the country let themselves get switched to metered service without a peep of complaint. 150Gb seems like a lot now, but in 3 years it won’t be a week’s usage… Stand by for higher prices from everyone as the value of your dollars continues to tank. It’s lost 1/3 of it’s value so far this year, so technically, Netflix just kept the price the same…

George Ou

You’re not going to be watching HD on their older DSL service since it isn’t fast enough, you need the higher end U-verse service for that which has a 250 GB cap. That allows you 4 to 10 hours of HD video per day every day of the week which is effectively unlimited for almost anyone.

The point is that it’s difficult to find a lot of streaming titles that are HD and difficult to find any streaming option on Netflix.